Seprod selling sugar factory, gains markets for grains
Seprod’s grain joint venture has opened up export markets in four regional countries in the near two years that it has been in operation.
And while Seprod CEO Richard Pandohie was not specific on the details, he said the payback on the more than $3 billion invested in the grain and flour mill is ahead of the five-year schedule originally forecast by the Jamaican company and its American partner Seaboard.
Seprod is looking for gains in the grain market just as it is closing the chapter on its failed adventure with sugar.
The factory at Duckenfield in St Thomas has been placed on the market for sale, said Pandohie, and Seprod has tapped PricewaterhouseCoopers (PWC) to find them a buyer for, they hope, the full operation.
The price being sought was not disclosed.
“We’ve engaged PwC to sell the factory. The best-case scenario is that someone could come forward to buy the assets and continue the operation. The cane in the fields is being maintained along with other things, because you never say never, since someone might have an interest,” he said.
In the meantime, Pandohie is reporting a threefold increase in the volume of exports of milled products produced at the Jamaica Grains & Cereals plant at Felix Fox Boulevard in Kingston.
“It is growing nicely, and the best part is that the export is growing,” Pandohie said, as he fielded questions on Seprod’s half-year financial results from the Financial Gleaner.
“We’re exporting to Colombia, Haiti, Trinidad & Tobago and Barbados, and while we have a watchful eye on geopolitical, input pricing, and foreign exchange considerations, we are tracking ahead of projections for the mills.”
He adds that while the Gold Seal wheat products produced at Felix Fox have been gaining traction in the Jamaican market, Seprod views a robust penetration of export markets as critical to the mill’s viability.
He reported that at half-year ending June, exports totalled $95 million, which is nearly three times more than the $34 million earned from exports over the similar period in 2018.
“Production in the Jamaican economy makes no sense if we’re not exporting. For the average manufacturing operation, about 85 per cent of the input is imported, so we have to export in order to offset that bill,” said Pandohie.
“Critical to the operation of the mill is getting into other value-added areas like gluten-free products, and so on,” he said, while disclosing that partnership talks were under way that could lead to expansion into new markets for Jamaica Grains overseas.
Seprod, the maker of Eve, Serge, Delite and Miracle products, grew six-month revenue by $7 billion or 70 per cent to $17.69 billion, driven by the acquisition of the Facey Consumer Division late last year, the company said.
Through the Facey acquisition, Seprod is repositioning as a heavyweight in the distribution trade and has pumped $1.2 billion into a 200,000-square-foot warehouse to be opened by month end August.
Despite strong sales, profit slipped for the conglomerate by $45 million or eight per cent to $553 million at half-year. Some of that fallout related to the loss-making sugar operation on which Seprod took a $330-million hit in the period, as well as $185 million in one-off expenses related to the consolidation of the company’s dairy business during the same period.
The company closed its dairy plant in St Thomas and merged the operations with its condensary at Bog Walk in St Catherine.
Pandohie says Seprod followed the requirement of a one-year notice period for the factory closure, which ended up impacting output at the plant. Just about 100 jobs were lost.
“I know we did the right thing in telegraphing and communication the closure, but it did have an impact in that it was the worst performance in the factory’s history. While it was disappointing, under the circumstances, we understand,” he said.
As for the sugar business operated through subsidiary Golden Grove, which was also based in St Thomas, Seprod has disclosed about $4 billion of losses over time before announcing last year that it was exiting the investment first made in 2009.
Pressed as to whether the current $330 million cash burn at the Duckenfield factory was the last of the fall out, Pandohie said the sugar plant was just closed in July and more expenses would be booked in the third quarter.
“The redundancies will not come in until the third quarter results are in. We had $70 million for redundancy payments paid in July. We don’t know what our auditors may advise in terms of certain charges, but whatever it is we’ve cleaned up Golden Grove now, so the cash burn and such are a thing of the past,” he said.